Wednesday, August 15, 2007

Taxman and the Minister

Corrupt Fiji Minister in Tax Evasion Racket

Last updated 8/15/2007 10:04:51 AM

A minister in the Interim Government failed to lodge tax returns for three years and was later assessed $95,000 tax on undeclared income. The minister paid late lodgement penalties when the tax returns for 2000, 2001, and 2002 were finally delivered in 2003.
The records also show a dramatic increase in bank interest over the four years, indicating cash at bank building to more than $1 million.
All this material that came into my possession before the coup indicates that this particular minister may have evaded tax.
I have had the material examined by forensic accountants who indicated that while the files are entirely typical of tax evasion they do not by themselves prove it.
They said a thorough investigation would be necessary to establish the truth.
My file on the minister's tax affairs has been handed to the Fiji Independent Commission Against Corruption.
My investigation covers income tax records covering a period of ten years.
In 2005, long before the current controversy that is raging over alleged tax evasion claims, I anonymously received a brown envelope whose contents clearly reveal that the Cabinet Minister had not submitted his annual tax returns for nearly three years, raising questions as to why FIRCA allowed him to do so because he was clearly in breach of the tax laws on submission of tax returns.
According to the records, the minister filed 2000, 2001 and 2002 returns together in late 2003 as all the original assessment notices were issued on 17 December 2003. The 2003 return was filed before 4 May, 2004.
FIRCA then issued amended assessments for all four years on 23 December 2004, presumably after audit and investigations. Many of the debit entries of assessments, penalties, and interest were credited (reversed) around or after those dates, as were the payments.
In January I began examining the documents on proving certain conclusions. I collaborated with overseas publications, which submitted the documents to forensic accountants who offered the view that while this kind of behaviour was entirely typical of attempted tax evasion they did not by themselves, prove tax evasion. More investigation was needed on that front.
We however found that the Cabinet minister in question did not submit returns for three years.
The tax records relating to this individual also reveal late payments, penalties, and negotiations to bring down payments, and huge lump sum payments and negotiated settlements over the ten-year period, from 1994 to 2004.
The record shows undeclared (omitted) income for each year. The audited ones show that there were penalties on the Minister for late payments. They also show that some of the penalties were, supposedly as a result of negotiation, reversed.It must be pointed out that it is not possible to identify sources of this alleged income from these documents.
That can only be identified from the actual returns submitted or as tracked by FIRCA from their own investigations, demands to banks for disclosure etc. The ten years of records show a huge increase in deposits held by the Cabinet minister, which were allegedly undeclared. This keeps increasing each year, according to the records. Assuming salary was the minister's only fixed income, the question is where did the increases in the minister�s bank deposits each year come from? FIRCA would not be interested in the source but only that one received income and he or she must pay taxes on it.
There were two payments made by the minister to FIRCA. The two entries that are most significant are the large payments made in 2004 and 2005. On 10 November, 2004, one payment of $86,069.62, under receipt number 5093831, was made to FIRCA. On 21 June 2005, another payment of $9,684.14, under receipt number 5142483, was made. The total of the two tax amounts paid by the minister and receipted is $95,753.76.
These are, according to experienced English tax assessors, very large payments by a mere politician. These are negotiated settlements for undeclared income, which the Cabinet minister could not argue out of with the Fiji taxman. The large number of assessments and charges imposed also show FIRCA "discovering" undeclared income. These two payments, at a top tax rate of 32 per cent in Fiji, represent undeclared income of around $300,000.
In observing investigative journalism guidelines, I had also sent a series of questions to the Cabinet minister concerned for answers or explanations but I am yet to receive a reply. As to Section 4 of the Income Tax Act, while the Act provides confidentiality to the taxpayer, it also requires that the taxpayer honestly declare his or her income. The law also requires that the taxpayer submit returns annually.

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